A year on – how much do you really know?
The 1 November marked the first birthday of
target="_blank"> junior ISAs
target="_blank"> junior ISAs. When our kids our young, their birthdays are of course always momentous occasions, but should we be celebrating this milestone in much the same way? Obviously we’re not talking about cakes and hats, but more celebrating the opportunity it gives our kids.
It appears not, with the first anniversary coming round with little fanfare. In fact, figures provided by children’s saving specialist shows that 56% of parents with kids under the age of 18, don’t even know what they are.
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So, what are they? And should we be celebrating them?
Junior ISAs; a quick guide
ISAs or investment savings accounts have been round for a while now. In basic terms they come in the form of Cash or Investment ISAs, and offer a tax efficient savings wrapper with which to build for your future.
A junior ISA is much the same, offered as either a Cash or Investment ISA, opened on behalf of your child, with you able to deposit funds into it on their behalf. Here are a few things you need to know.
Junior ISAs are available for your child is:
- They are under 18
- Live in the UK
- Do not have a Child Trust Fund account
ISAs may offer tax efficient savings, but unfortunately this is capped, with an annual ISA allowance. For a junior ISA, this is set at £3,600 each tax year. It’s the maximum that can go in each year, with no option for carrying it over into next year.
This depends on which option you go for. With a Cash Junior ISA you won’t pay any tax or interest on the cash your save, whereas with the investment option, your cash is invested and you won’t pay tax on any capital growth or dividends you receive.
The amount you can pay in each year may be capped by the ISA allowance, but there is no limit to the number of people who can make contributions. This means that if you have family members or friends who wish to help towards the future of your child, they can do.
Drawing the funds
It’s in their name, so it’s their ISA; but they can’t draw any of the funds until they turn 18. When they do the ISA will transfer to an adult ISA and they’ll be free to make the decisions on how they use the funds.
Should we be celebrating?
With the increase in university tuition fees and the trouble many first-time buyers face getting on the property ladder; a junior ISA could be the ideal savings vehicle.